Electric two wheelers may come with a lower price tag soon

India first offered tangible support to the electric vehicle industry at the end of 2010, with the new and renewable energy ministry announcing a Rs 95-crore incentive scheme for manufacturers.Sharmistha Mukherjee | ET Bureau | Updated: July 19, 2016, 23:37 IST

NEW DELHI: The Centre will work towards reducing the price of electric two wheelers and bring them on a par with or lower than petrol-driven ones, a move aimed at reducing exhaust-pipe emissions in Indian cities, some of which are among the most polluted in the world.

A senior official told ET the department of heavy industries has given a go-ahead for the constitution of a four member committee to suggest ways to boost sales of electric two-wheelers. The committee will explore ways to lower price tags, among other measures, the official said.

In India, the ticket price of an electric two-wheeler is about 1.5 times that of a petrol version. With the government bridging a third of this price differential through incentives under the FAME India (faster adoption and manufacturing of hybrid & electric vehicles) initiative, the premium on an electric two-wheeler stands at about 15% over a petrol version.

“The idea is to bring the industry on board to implement measures which can ensure faster adoption of electric two-wheelers,” the official, who did not wish to be named, said, adding that a second meeting on this issue will take place later this week.

The National Electric Mobility Mission Plan (NEMMP) 2020, projects sales of six-seven million units of electric vehicles and a resultant fossil fuel saving of 2.2-2.5 million tonnes. This will also result in substantial lowering of vehicular emissions and decrease in carbon dioxide emissions by up to 1.5% by 2020. Apart from looking at ways to put in place charging infrastructure, the committee will also recommend steps to bring down the cost of batteries and components.The decision is in line with the government’s plan to create infrastructure for electric vehicles, which are seen as key to its efforts to reduce toxic particles in the air. It was taken at a meeting last month which was attended by electric vehicle makers including Lohia Auto, Hero Electric, Electrotherm and Ampere.

“If we can standardise components and develop a local supplier base for electric two-wheelers, purchase price of the vehicle will come down,” said Ayush Lohia, chief executive officer of Lohia Auto.

“However, unlike in cars, there are no deep-pocket players in the electric two-wheeler space and financing arrangements will have to be looked into.” The proposed committee is expected to work on the same lines as the consortium formed by Maruti Suzuki, Tata Motors, M&M, Ford India and Mahindra Reva Electric Vehicles in the four-wheeler space to promote local development of critical components, which would lower costs.

Sohinder Gill, chief executive at market leader Hero Electric, said, “Today, financing is not available for purchasing electric two-wheelers. If the RBI mandates public sector banks to undertake financing solutions for e-mobility, immediately a lot more consumers will be able to purchase our products.” Meanwhile, the industry is also discussing ways to reduce the cost of e-bikes by localising critical components. It is considering development of swapping centres for batteries for electric two-wheelers to address current challenges arising from infrastructural constraints.

“What is also important is how fast you can recharge batteries, how far the vehicle can go on a single charge, and how widespread is the charging network,” said Sridhar V, partner at Grant Thornton, a consultancy firm. “You cannot target only urban consumers, even the rural pockets have to be kept in mind for mass adoption.”

According to Gill, industry body Society of Manufacturers of Electric Vehicles (SMEV) has suggested that logistics companies should be asked to include electric vehicles as part of their fleet. “With the ecommerce industry exploding, the need for transportation has gone up substantially. If the government mandates logistics firms to convert a certain percentage of their fleet to electric, immediately adoption will increase”, said Gill, who is also a director at SMEV.

Indeed, the potential for electric vehicles in the logistics space has grabbed the attention of corporate India. Last July, Ratan Tata, chairman emeritus of Tata Sons, invested an undisclosed amount in Coimbatore-based electric two-wheeler and electric three-wheeler manufacturing firm Ampere. Founders of e-tailer Flipkart—Sachin Bansal and Binny Bansal—too have put their bucks on Bangalore-based startup Ather Energy, which is designing high speed electric two-wheelers.

India first offered tangible support to the electric vehicle industry at the end of 2010, with the new and renewable energy ministry announcing a Rs 95 crore incentive scheme for manufacturers. Import duty on batteries was cut to 4% from 26%. Price rebates of up to 20% were offered, subject to a maximum of Rs 1 lakh for an electric car.

Under the NEMMP scheme, the government was to invest up to Rs 14,000 crore in creating infrastructure and promoting the use of environment-friendly electric vehicles. Industry was to pitch in the extra Rs 10,000 crore required to develop products and create a manufacturing ecosystem.

In fact, segment leaders like Maruti Suzuki, Tata Motors and Hero MotoCorp have reported de-growth of 34.3 per cent, 45 per cent and 20 per cent, respectively giving a clear indication of a prolonged slowdown in the sector.